Key Perspectives and Trends
Global commercial real estate markets remain liquid, but investors are becoming increasingly cautious.
Global debt markets continued to grow in the first half of 2019 with fundraising by private closed-ended real estate funds totalling US$14.9 billion. Increasingly size matters, with investors opting for the biggest debt funds closing at US$1 billion or more.
As negative yielding debt rapidly becomes the norm, funds that focus on non-performing and sub-performing loans and distressed debt are coming to the fore, an indication that some investors are concerned over how much longer the current cycle has to run.
Debt is abundant throughout the capital stack, with a growing volume of private debt dry power available to invest globally. Banks are competing strongly for both fixed and floating rate debt with a particular focus on transitional properties and those with stable cash flows. While they continue to dominate the conventional real estate debt market, alternative lenders are also on the rise amid increased regulatory pressure resulting from the lingering impacts of the global financial crisis. The presence of non-bank lenders, led by debt funds and insurers, have been financing alternative asset class deals, as banks remain cautious on less established sectors.
The current state of the retail sector has left lenders cautious to originate new loans amid falling values, significant structural changes from the rise of e-commerce and a lack of comparable transactions. Despite slowing during the first half of 2019, the CMBS market remains healthy and the conduit market is expected to finish the year strongly.
Read more in the latest Global Debt Market Update.